7 comments:

Anonymous
said...

My heart goes out to all those fast food workers protesting for higher wages, but I'm sad to have to watch them experience the harsh lesson in real-world economics that's about to hit home. By taking to the streets and demanding $15 / hr. in wages, fast food workers are unintentionally making themselves economically obsolete. They are, in essence, guaranteeing their own unemployment.

Sadly, few of the protesters realize this. Nor will they realize why they are being fired when that day soon arrives. Entry-level fast food workers, after all, tend to have relatively little knowledge of how business really works, where money comes from, where money goes and why no private sector business can stay in business for very long if its operating costs exceed its income.

It's no wonder fast food workers are desperate to fight for higher wages, but the raw truth of the situation is that a $15 / hour wage mandate would simply cause many fast food companies to close their doors and go out of business. There's very little profit margin in the fast food industry, and businesses can't simply raise their menu prices because "low cost food" is the primary reason why people buy fast food in the first place.

McDonald’s employees who picketed for a better living wage (whatever that means) may come to regret that decision. According to a Redditor, a McDonald’s in Illinois replaced their cashiers with machines. The machines appear to be the cousins of the ones found in grocery stores, big box stores, and CVS that allow customers to complete transactions.How cost effective is replacing an organic employee with a mechanized one? According to an economic blog, and unsurprisingly, the machines likely come out on top in terms of pricing:• For a location open 24 hours: The cost of human cashiers, not counting benefits, $15/hour * 24 hours * 365 days/year = $131,400• For a location open 6AM to Midnight: $15/hour * 18 hours * 365 = $98,550.• For the machine to be cost effective, all it needs to do is cost less than $100,000 a year to buy and maintain.Who could’ve possibly seen this coming? Forbes. They predicted this exact scenario last July.A recent article at the Huffington Post makes the claim that if McDonald’s MCD +0.26% doubled its employees salaries it would only cause the price of a Big Mac to go up by 68 cents. The implication here is that 68 cents isn’t much money, so they should do it. There’s a few things missing from this. One is that the article itself alleges that doubling wages would lead to a 17% increase in costs. And I guess this is obviously supposed to seem like a small amount? It doesn’t look that way to me. What do people expect will happen when prices go up 17%? If McDonald’s could raise its prices by that much without lowering demand they would. No, what would happen is people would shop at those stores less, there would be less profit and less McDonald’s stores to hire workers.Doubling of labor costs will simply increase a fast food restaurant’s incentives to adopt technology like this. And if fast food wages doubled everywhere it would spur the development of these technologies even faster.This is all basic economics, really. As costs of labor increase the added cost must be offset. In order to satisfy operating costs, produce a product consumers want to purchase, and still turn a profit, it’s perfectly reasonable for a company like McDonald’s to look for cost-cutting alternatives. As Forbes pointed out, the added pressure to increase wages only serves to expedite technological solutions.But cooks are safe from the machination of American fast food, right?Not if companies like Momentum Machines has anything to do with it. “Our technology will democratize access to high quality food making it available to the masses,” their site claims. They also claim their burger making machines can, “do everything employees do except better” and that the machines reap such large labor savings, restaurants will be able to afford twice as fancy ingredients. Tempting little proposition they have there.“Would you like fries with that?” may soon be a long forgotten relic of American pop culture. And all because it makes good economic sense.

"It’s not the case, as the president implied, that most fast-food workers work to “provide for their families.” In fact, 73.4 percent of them are childless, according to government data..." - The Washington Post

Machines: no vacations, paid sick leave/call in sick, worker's comp/unemployment insurance, FICA, don't steal, give away food, ask for a raise, get free employee meals or uniforms, quit without notice, take bathroom breaks, get injured on job, need performance reviews, paid for overtime, show up late for work or get pregnant. Sounds good to me.